Transcript: Nightly Business Report – January 9, 2017

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue
Herera.

Funded in part by HSS.

(COMMERCIAL AD)

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Shifting gears. The
president-elect was not at the Detroit Auto Show. But this year, he had
the biggest presence.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Patience, my dear. Wall
Street is eager for a package of business-friendly policies, but how long
will investors be able to wait for them to take effect?

HERERA: A growing problem? What happens when farmers don`t have enough
workers to harvest their crop? It`s something many are trying to figure
out.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday,
January 9th.

MATHISEN: Good evening, everyone, and welcome.

The auto industry may be coming off a record year for sales. But few
expect a really smooth ride ahead. President-elect Donald Trump has been
roiling the sector with tweets about production in Mexico and threats of a
big border tax on vehicles made abroad.

Fiat Chrysler today trumpeted a billion dollars in U.S. manufacturing. It
drew praise from Mr. Trump. Although the auto maker insists the move is
part of an already established business strategy. Ford, as we reported,
last week, canceled plans to build a new plan south of the border, but
General Motors (NYSE:GM) CEO says she is not changing a thing and that her
company`s small car production will stay right where it is, in Mexico.

As Phil LeBeau reports, it`s the back and forth with Mr. Trump that has
overshadowed the usual glitz of the Detroit Auto Show.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Beyond the bright
lights and big production introducing new models, the biggest presence at
the Detroit Auto Show is President-elect Donald Trump. He is not visiting,
about you on the mind of everybody here who realized Trump wants more auto
jobs created in the U.S. and not overseas.

So, Fiat Chrysler has announced plans to hire 2,000 more workers as it
expands Jeep production in Michigan and Ohio. President-elect Trump
tweeted about the decision, saying, “It`s finally happening. Fiat Chrysler
announced plans to invest $1 billion in Michigan and Ohio plants adding
2,000 jobs.”

SERGIO MARCHIONNE, FIAT CHRYSLER CEO: The timing may have coincided with
this incredible emphasis that Trump is making on sort of American-made
products and American production. But I think the substance of the
announcement was inside the House for months.

LEBEAU: This move comes a week after Ford scrapped plans to add a plant in
Mexico, in favor of expanding a current one in Michigan, where it now says
it will build a new version of the Bronco SUV.

MARK FIELDS, FORD CEO: There is a lot of love out there. You go to lots
of websites on Bronco advocates and we`re bringing that vehicle back in
2020.

LEBEAU: GM CEO Mary Barra says her company has no plans to change where it
builds vehicles, which includes Mexico. In fact, GM and Fiat Chrysler are
among the biggest importers from south of the border. The question is, how
quickly those numbers could change if the president-elect succeeds in
getting a border tax on Mexican-made autos?

JEFF SCHUSTER, LMC AUTOMOTIVE: I think the next few months are going to be
very interesting and certainly going to be difficult for the industry
depending on what the flavor of the day is.

LEBEAU: For all the talk here about executives trying to figure out how
they`ll deal with President-elect Donald Trump, one thing has not changed
in the auto industry — record high sales. As one executive put it, sales
are great. What`s not great is trying to figure out where we will build
those cars and trucks in the future.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Detroit.

(END VIDEOTAPE)

MATHISEN: Meantime, at Trump Tower in New York City, the president-elect
met with Alibaba`s Jack Ma who said he plans to create a million jobs in
the U.S. by getting more small businesses to sell to China and other Asian
countries on the Alibaba platform. The two talked to reporters where Mr.
Trump also commented on the upcoming confirmation hearings for his cabinet
picks.

TRUMP: I think they will all pass. I think every nomination will be —
they`re all at the highest level. Jack was even saying, I mean, they are
at the absolute highest level. I think they will do very well.

(END VIDEO CLIP)

HERERA: And one day before those confirmation hearings begins, Senate
Majority Leader Mitch McConnell met with the president-elect at Trump Tower
to discuss strategy. And late today, there are new reports that Donald
Trump`s pick for secretary of state, former ExxonMobil (NYSE:XOM) CEO Rex
Tillerson did business with Iran while under U.S. sanctions.

Eamon Javers is in Washington with more.

So, Eamon, will Mr. Tillerson face the toughest grilling this week? There
are a number of them scheduled.

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Yes, that`s right,
Sue. Tillerson has always been viewed as perhaps the most wobbly of the
Trump appointees here, going into the confirmation battle this week. We`ll
have to wait and see how the hearings go.

But this new story that you just mentioned from “USA Today” this afternoon,
reporting that ExxonMobil (NYSE:XOM) did business with Iran through a
subsidiary that was based in Europe, at a time when Tillerson was an
executive of the company, that`s going to be one that`s going to attract a
lot of attention here in Washington.

Tillerson was already facing some skepticism from Republican lawmakers,
including Senator John McCain who sat down with “Meet the Press” over the
weekend, along with Senator Lindsey Graham. He expressed to Chuck Todd,
the anchor to that program, exactly why he was still skeptical of Tillerson
even after he met with them. Here`s what he said.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: Mr. Tillerson`s relationship with Putin
personally and Russia raised concerns with me. I met with him. I still
have additional questions. We always —

CHUCK TODD, MEET THE PRESS: Did he have any concerns with you?

MCCAIN: Oh, yes, yes.

TODD: (INAUDIBLE)

MCCAIN: I think there are a couple of areas I feel better.

(END VIDEO CLIP)

JAVERS: So, you hear McCain there saying he feels better in a couple of
areas. He still has additional questions, Sue.

MATHISEN: There are also picks for Commerce, Defense, Housing, labor, that
comes basically on Thursday. Some of these picks are controversial. What
can we expect?

JAVERS: Well, absolutely. Wednesday and Thursday are going to be big days
and remember, on Wednesday, you`re going to see a whole bunch of people up
there, at the same time Donald Trump has his press conference on Thursday.

Wilbur Ross of Commerce. Rex Tillerson might have a second day. General
James Mattis for defense secretary. Ben Carson at HUD.

All of those folks will be up there on Thursday. So, this is going to be a
very big week, a ort of a make-or-break week here for the Trump cabinet in
waiting.

HERERA: There are reports late this afternoon that Mr. Trump`s son-in-law
will take a White House role. What about potential conflicts of interest
on his part and his wife Ivanka`s part? What do we know at this point?

JAVERS: Well, we`re learning a couple of things about Jared Kushner`s role
in the future Trump administration. We are told that he will be serving as
a senior adviser in the Trump White House and Trump officials are confident
that they can get around the anti-nepotism provisions because the White
House itself is not subjects to them, they argue. They are also saying
that Jared Kushner will divest substantial assets, that he`ll resign his
position at the Kushner companies and also at “The New York Observer”.

So, it`s clear that Jared Kushner is going to make a big pitch to be a big
part of the Trump administration.

Not so clear about his wife, Ivanka, Donald Trump`s daughter. We are being
told that she is not expected to take a role any time soon in the Trump
administration, at least formally. But, of course, we know that she is a
very valued adviser to the incoming president-elect.

HERERA: Indeed. Eamon, thank you very much.

JAVERS: You bet.

HERERA: Eamon Javers in Washington.

MATHISEN: The drug industry also preparing for a Donald Trump
administration. The president-elect has said in the past that he wants to
bring drug prices down. And after a rocky 2016 and lots of uncertainty
heading into this New Year, the $5 billion pharmaceutical deal announced
this morning helped boost some optimism and that deal comes at the start of
the biggest industry event of the year.

Meg Tirrell reports from the J.P. Morgan Healthcare Conference in San
Francisco.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: More than 9,000
investors and analysts and company executives braved storms to get to the
J.P. Morgan Healthcare Conference in San Francisco this week.

And they were greeted Monday morning by news of the deal. Japanese
pharmaceutical company Takeda is paying about $5 billion to acquire
Massachusetts biotech Ariad Pharmaceuticals. That`s a 75 percent premium
to Ariad`s closing price last week.

CHRISTOPHER WEBER, TAKEDA PRESIDENT & CEO: We are very disciplined. So,
discipline means that we are not shy to look away when the price isn`t fit
to the value that we se. So, we looked at the potential of (INAUDIBLE),
the pipeline, the platform and we feel that this is a fair price.

TIRRELL: The news buoyed investors` hopes for a brighter 2017. They also
cheered an announcement from cancer drug developer Incyte (NASDAQ:INCY) on
a collaboration with Merck (NYSE:MRK) in immunotherapy, an important new
way of treating cancer using the immune system.

KEN FRAZIER, MERCK CHAIRMAN & CEO: We are excited about Keytruda, which we
believe is foundational in the treatment of a lot of tumor types. And so,
we are very pleased with having a first line claim for people who had lung
cancer. We are also interested, though, in getting the right drug to the
right patient. And that involves different kind of combination studies.

And so, the work that we`re doing with Incyte (NASDAQ:INCY) allows us to
look at that particular combination and to figure out which percentage of
patients might benefit from a combination over and above nanotherapy.

TIRRELL: But the industry has been under siege for the pricing of its
drugs and President-elect Donald Trump has embraced the issue, telling
“Time Magazine” he`ll bring drug prices down.

DAVID RICKS, ELI LILLY PRESIDENT & CEO: We`ll engage with the new
administration, as we would any new administration. The Chairman Price is
the HHS incoming secretary. He knows a lot about health care. To try to
solve the problem, how do we make medicine as affordable and for patients
as we can, and more balanced with the rest of the health care services and
products people consume?

TIRRELL: And, of course, a risk for all industries, the threat of a Trump
tweet.

MARK ALLES, CELGENE CEO: The president-elect goes straight to the American
people by tweeting and at least for me, it`s a normal condition now. This
is the new reality, the new norm of bypassing a lot of filtered media and
going straight to the American people.

TIRRELL: Though the impact of the new administration leaves many open
questions for 2017, investors by and large are optimistic about new
progress in treating disease.

For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell, in San Francisco.

(END VIDEOTAPE)

HERERA: On Wall Street, it was a record for the NASDAQ, helped by a
biotech deal between Arian and Takeda that Meg just mentioned. But the Dow
retreated further from 20,000 as energy shares and utility stocks fell.
The Dow Jones Industrial Average fell 76 points to 19,887. The NASDAQ rose
10 and the S&P dropped eight.

Stocks have rallied since Election Day on the idea of potential tax cuts,
infrastructure spending and a decrease in regulation. But how long will
investors have to wait to see the policies put in place?

Mike Santoli takes a look.

(BEGIN VIDEOTAPE)

MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Wall Street is eager
for a package of business-friendly tax cuts promised by the incoming Trump
administration. But will the markets have the patience to wait for them to
arrive perhaps only after a tortured trip through Congress?

While swift action and government regulations and undoing parts of
Obamacare appear likely soon after Trump`s inauguration, policy analysts
say corporate tax reform measures might not come to a vote until the back
half of 2017. This could disappoint those investors who bet on stocks
based on what a Republican-controlled Washington might do on taxes.

The good news, though, the market seems not to be placing all its eggs in
the policy basket just now. The so-called Trump trade favoring industries
that would gain from lower domestic taxes and new infrastructure spending
peaked about a month ago. Manufacturing and bank stocks have lagged the
broad market since mid-December after sharp rallies in the four weeks
following Election Day. And shares of companies with high tax rates
thought to be major beneficiaries of tax reform have likewise trailed the
S&P 500 the past several weeks this.

This suggests the index`s levitation to record highs has been more about an
expected rebound in corporate profits and to pick up economic indicators
globally. Earnings are projected to grow by some 12 percent in 2017, with
the strongest results in the second half.

While such estimates tend to be whittled down a bit as the year goes on,
it`s probably a plus that most analysts have not boosted their forecast yet
by adding any benefits of possible tax changes. Whether the market`s 6
percent gain since the election has priced in much of this earning`s
recovery is a key process as the bull market approaches its eighth
anniversary. A stock market that trades on corporate fundamentals is
perhaps healthier than one depending on policy help from Washington that
might or might not arrive in a desired form. But it does raise the stakes
for the earnings season that`s about to get under way in the coming days.

For NIGHTLY BUSINESS REPORT, I`m Mike Santoli at the New York Stock
Exchange.

(END VIDEOTAPE)

MATHISEN: And here to talk more about the markets is Michael Farr. He`s
president of Farr, Miller and Washington.

Mr. President, welcome and happy New Year.

MICHAEL FARR, PRESIDENT, FARR, MILLER AND WASHINGTON: Ah, I like hearing
Mr. President and Washington, I`m not sure I still have the right airport.

MATHISEN: Let`s talk about what Mike Santoli just mentioned. And that was
earnings that are going to start coming fast and furious, roughly at the
time of the inauguration.

Do you think they are going to this year be strong enough to support stock
prices where they are?

FARR: Probably not on that 12 and 13 percent growth range that Mike talked
about. I thought that was an excellent report. I mean, everybody should
have listened to what Mike just said, which is that the markets priced in a
very rosy scenario and we still need to see if it`s going to deliver.

Out of the blocks, we`re going to be looking at bank earnings. We`re going
to be looking to see if the changes in the dollar, we saw a dollar spike
and really went up a lot after the election. It went up significantly and
when it does that, it trims the GDP, but it also can trim off of some of
the profit margins of some of the multinationals. So, there are some
headwinds in place and markets been looking for all of the good things that
are going to come tomorrow and ignoring some of the tough things today.

HERERA: Yes. And you argue that stocks are not inexpensive at these
levels.

FARR: I mean, we are flirting, Sue, with Dow 20,000 and record levels
today on the NASDAQ and record levels here and there. And so, when you`re
at all time highs and you`re not low. And if the old rule is to buy low
and sell high, certainly, you have to be careful and I think this is really
no point where you start reaching for extra yield and a rising rate
environment. You don`t go to the thin branches to get extra returns on the
equity shares.

This is the time to play it more safe until you see the whites of their
eyes.

MATHISEN: One of the areas that you do like is health care. Why?

FARR: Well, if you listen to the early reports and the scrutiny under
which the pharmaceuticals are coming in a J.P. Morgan conference, another
great report on the NIGHTLY BUSINESS REPORT tonight, you`ve got to watch
NIGHTLY BUSINESS REPORT. You are learning a lot.

So, we`re seeing that this is really under pressure. We`re seeing the drug
companies are under pressure. Right after the election, we saw a lot of
the companies that could be negatively affected by a reform of the
Affordable Care Act really started to drop.

I think maybe they have overdone it. I think there is real value there.
These are typically not economically sensitive stocks. They still benefit
from that huge area of the demographic of the aging population.

So, you look for things that look to be reasonable values. I look some of
the medical device companies that I think are very attractive and probably
much safer place, solid balance sheets, good dividends to put money to
work.

HERERA: And still ahead, the surprise move from the government that could
lower cost for some mortgage borrowers.

(MUSIC)

MATHISEN: Online shoppers helped overall holiday sales. A new
comprehensive report from first data shows that overall consumer spending
grew more than 4.5 percent over the previous year. Online retail purchases
were up 12 percent. The data tracked payments for nearly a million
merchants between late October and early January.

HERERA: To real estate now where future borrowers are about to get a break
on their monthly mortgage payments, a parting gift to the housing market
from the Obama administration which may or may not be returned by the
incoming White House.

Diana Olick has more.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Federal Housing
Administration, the government insurer of low down payment home loans, is
reducing the annual mortgage insurance premium by 25 basis points which it
says will save FHA borrowers an average $500 this year. It expects one
million Americans to use FHA loans this year either to buy a home or to
refinance a home loan.

The FHA`s insurance fund was a major player in the housing bailout,
offering borrowers the only low down payment option available. But it came
at a cost to FHA. The insurance fund fell into the red, requiring a
bailout of $1.7 billion in government funds itself. It has since gained
$44 billion in value since 2012 and has been above its capital requirements
for two years.

HUD`s Secretary Julian Castro said this is a fiscally responsible measure
to price our mortgage insurance in a way that protects our insurance fund
while preserving the dream of home ownership for credit qualified
borrowers. He added he does not expect the Trump administration will scale
it back, but Republicans quickly fired back. Representative Jeb
Hensarling, chairman of the House Financial Services Committee which
oversees the FHA, said, “Playing politics with the FHA through cynical
surprise 11th hour rule changes is irresponsible and endangers the
integrity and success of the FHA.”

President-elect Trump`s nominee for HUD secretary, Ben Carson, will be on
the Hill for hearings Thursday.

For NIGHTLY BUSINESS REPORT, I`m Dina Olick in Washington.

(END VIDEOTAPE)

MATHISEN: Blackstone doesn`t want to a piece of Energy Transfer Partners
anymore and that is where we begin tonight`s “Market Focus”.

Several reports say the private equity firm has ended talks with the
natural gas pipeline operator about a stake worth $5 billion. Last month,
“The Wall Street Journal” reported the two companies were in talks about a
potential deal. Blackstone shares off a fraction $30.47, the close, but
Energy Transfer was off about 2.5 percent at $36.53.

Merrimack Pharmaceuticals will sell some of its cancer treatments to the
French drug maker Ipsen in a deal worth up to $1 billion. Merrimack also
said it`s cutting its workforce by 80 percent. Shares rose almost 2
percent to $3.67.

And UnitedHealth Group (NYSE:UNH) said one of its subsidiaries will buy the
ambulatory services chain Surgical Care Affiliates for more than $2
billion. As part of the deal, UnitedHealth will add more than 200
outpatient facilities and about 3,000 physicians to its unit. UnitedHealth
Group (NYSE:UNH) fell a fraction to $161.95 while shares of Surgical Care
Affiliates soared 16 percent to $56.65.

HERERA: The food giant Mars said it would strengthen its pet care division
by taking care animal hospital operator VCA for nearly $8 billion. The
owner of Iams and Whiskas brands already owns pet hospitals but will
acquire hundreds more in this deal. VCA shares surged 28 percent to
$90.79.

Goldman Sachs (NYSE:GS) is turning bearish on Procter & Gamble (NYSE:PG)
and Coca Cola. The bank lowered its rating on Procter and Gamble from
neutral to sell, citing valuation concerns, and the expectation that the
conglomerate will pose disappointing quarterly sales. Coke also was given
a sell rating due to currency headwinds and the belief that it might miss
expectations this year. P&G shares were off a fraction to $84.40. Shares
of Coke fell 1 percent to $41.32.

And lightings systems maker Acuity reported disappointing earnings due to
lower demand and warned the weakness could linger in the current quarter.
The company cited a rise in manufacturing costs for the poor results. The
shares were punished. They fell more than 14 percent to $202.51.

MATHISEN: And coming up, what`s prompting farmers to do something many
have never done before.

(MUSIC)

MATHISEN: The America`s labor market is as tight as ever. U.S. businesses
have added millions of jobs since the Great Recession. But there`s one
industry that is experiencing a labor shortage, agriculture. And now, some
farmers are worried that Donald Trump`s immigration policies could make the
problem even worse.

ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Pete Aiello and his dad
have been farming for 40 years on their 5,000-acre operation based in
northern California. But, lately, they`ve had a growing problem.

AIELLO: We`re leaving some crops behind. We`re not able to keep up with
harvests.

ROY: The Aiellos don`t have enough workers to harvest crops. They`re not
alone. Across the country, farmers are facing a labor shortage that some
are calling a crisis.

AIELLO: Of course, it`s a financial burden. You have to make difficult
decisions sometimes as far as having two fields to harvest but only being
able to harvest one of them.

ROY: Partnership for a New American Economy, a bipartisan immigration
reform group, reports between 2002 and 2014, the number of full time
agricultural workers has dropped by 146,000 people, resulting in a loss of
about $3 billion in crop productions. And the American Farm Bureau
Federation has come out with videos showing farmers forced to destroy crops
or let them rot in the fields because they simply don`t have enough workers
to pick them.

UNIDENTIFIED MALE: Last year, I had to do something I had never done
before. Destroy ten acres of good squash.

ROY: And now, some farmers are worried the problem will get even worse if
Donald Trump makes good on his campaign promise to deport undocumented
workers.

DONALD TRUMP (R), PRESIDENT-ELECT: We are going to triple the number of
ICE deportation officers.

ROY: More than half of the country`s agricultural workers are
undocumented, according to the USDA. The American Farm Bureau estimates an
immigration policy that focuses solely on enforcement could cost the
country $60 billion in agricultural production.

KRISTI BOSWELL, AMERICAN FARM BUREAU: We are at the point that we are
importing our labor or importing our food. And farmers (INAUDIBLE) across
American want to provide these locally grown fruits and vegetables to our
consumers, but we have to have access to a legal and stable workforce to
get that done.

ROY: Pete Aiello calls the current immigration system broken. He says
he`s watching and waiting to see if Trump can fix it.

AIELLO: We need to come up with a system that works first and then secure
borders.

ROY: On the solutions side, the American Farm Bureau says the current
guest worker program, the H2A visa program, is full of bureaucratic
challenges and delays. The group believes any effective immigration policy
needs to reform that system.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, Gilroy, California.

(END VIDEOTAPE)

HERERA: Children don`t come cheap. A new report out today shows that
raising a child could cost you nearly a quarter of a million dollars. And
according to the Department of Agriculture, that number does not include
college. Housing is the biggest expense, followed by food and child care
is also right up there. And as children age, so does the amount spent on
transportation, food, health care and clothing.

MATHISEN: They do eat more as they get older.

HERERA: Yes, they do.

MATHISEN: And finally tonight, it was 10 years ago today that Steve Jobs
unveiled the first iPhone in his trademark black turtleneck. Jobs called
it a revolutionary product. Boy, did he know that.

The original iPhone had four to eight gigabytes of storage and Apple
(NASDAQ:AAPL) was valued as a stock at — about $75 billion. The latest
version has 256 gigs of storage and Apple (NASDAQ:AAPL) is worth about $630
billion, the most valuable company in the world.

HERERA: It really did revolutionize.

MATHISEN: A product that changed the world.

HERERA: Absolutely. It changed my life suddenly.

MATHISEN: Yes, a computer in your pocket.

HERERA: All right. That does it for NIGHTLY BUSINESS REPORT tonight. I`m
Sue Herera. Thanks so much for watching.

MATHISEN: And thanks from me as well. Have a great evening, everybody.
We`ll see you back here tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
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the views of Nightly Business Report, or CNBC, Inc. Information presented
on Nightly Business Report is not and should not be considered as
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